Commercial diplomacy in action to ensure a micro-state's international competitiveness during years of economic and political turmoil: the case of Andorra

Abstract

This case study discusses the Andorran Government’s diplomatic response to ensure the country’s international competitiveness and continuity in the European regional economic bloc throughout the recent financial crisis imperatives and external threats that led to their immediate economic and political environment after 2009. After a short revision of the commercial diplomacy literature, we briefly describe the characteristics of micro-states, particularly of Andorra. This section is followed by an explanation of the extremely critical situation in Andorra in 2009. We have analysed the country’s diplomatic and governmental responses. During the two years following 2009, Andorra saw an unprecedented acceleration of international policy signing, which included over 18 bilateral agreements to exchange tax information. These agreements ensured Andorra’s ability to maintain its position in the international economic arena as well as its most important commodity, full sovereignty as a normalised country. Simultaneously, Andorra substantially changed its internal tax structure and has prepared future negotiations with the EU to join in the coming years the European Economic Area. All these actions were adopted in the face of threats and unprecedented international pressures from neighbouring countries and international organisations.